Striving for Funding: Confessions from Dubai's CareZone

Read In

Editor’s note (NC): Sometimes a
good idea does not find funding in an appropriate time frame. It
could be a failure of execution, opportunity, team, or approach on
the entrepreneur or investor’s side. In the case of
Dubai-basedCareZone, none of the
above apply- it’s a unique idea that garnered the attention of
several investors and respect from the
community.

So why couldn't the project find funding, nine months after
development? It may be an idea that was early for the market. The
mobile platform, designed to offer shoppers rewards on their
purchases, which they can then donate to charity or reimburse for
gifts, is designed to serve those who want to give back to their
communities. Founder Ritesh Tilani, who
spoke to Wamda about the platform at Arabnet last, was
realistic about the startup process, investing his own savings to
build the mobile platform up from
scratch.

But is 6-9 months simply too short a time frame for finding
funding in the MENA region? It has not been enough time to become
profitable, and scaling is currently a chicken-or-egg issue for the
startup. Investors have been concerned about its market,
profitability, and initial team of one. Yet Tilani intends to hire
and grow the team once he secures investment. He has polled
consumers and presented data to affirm the market need, but has
been forced to confront the fact that investors’ wariness about the
market traction has prevented the idea from scaling the way he
hoped it would have by today. As he pivots the project into a new
phase, he reflects on the reasons that it has been difficult to get
funding, which other entrepreneurs may have perspective on (share
with us in the comments). Here are his words:

CareZone was launched last August as a platform to reward users
for shopping with businesses that give back to the community. In
addition to earning rewards for themselves, users can select their
favorite causes to directly benefit from their individual actions.
We received phenomenal feedback from our users and required funding
to grow our merchant network, market it to a wider audience, and
make the service available on more platforms with new features.

I've been actively seeking funding for about 7 months, and it's
been extremely challenging. Things move slowly in this region when
compared to other markets. Some investors have drawn-out processes.
Quite a few have behaved opportunistically; for example, I was
asked to give up 70% of the equity in my very first investor
meeting. Others said they liked what they saw, but have still
been non-committal for a variety of reasons. At the same time, it’s
been refreshing and encouraging to see that there are a handful of
supportive individuals in the investor community who genuinely care
about nurturing the startup ecosystem in the Middle East and
helping individual startups whether they end up investing in them
or not.

In my experience, I discovered that investors appeared to be
more risk-averse than I originally thought they might be, and I
wanted to get a better understanding of what they were looking for.
While everyone encourages entrepreneurs in the Middle East to be
innovative and creative, innovation by definition introduces risk,
since a concept that is truly new and disruptive will never be
fully tried-and-tested right off the bat. Entrepreneurs have a
responsibility to be innovative, but it helps if investors are also
willing to fund innovation.

I've been focused on identifying smart money, looking at
regional investors who can add value to CareZone not just with
capital, but with knowledge, experience and networks. And it’s
become clear to me that the ecosystem needs more avenues for
financing for expat-driven early-stage startups.

If your startup is a tech venture or a social venture (or both,
as is the case with CareZone), it can be difficult, as the majority
of the small set of angel investors and VCs in this domain are
looking for sure (or safe) bets in a tough environment. While tech
is a hot topic, the nascence of the ecosystem makes experimentation
with newer ideas difficult. Had I been building a clone of an idea
that had been validated in another similar emerging market, it
might have been easier.

CareZone is completely unique and original, both in its business
model and its use of technology, and it is a solid product that has
been validated in the market, gaining paying clients and building
revenue, while offering benefits for causes. It won the award for
'Best New Business' at the SME Advisor Stars of Business 2011
Awards in November, which was a huge honor for us. GoNabit won the
award the previous year, and we had tough competition from more
established players.

It is by no means the perfect startup. I have been aware of
investors’ concerns about the possibility that CareZone was too
early for the market. To prove the product could be built to a high
standard and that it had a market, I invested my own savings into
building the first version of the platform and the iOS app. I
generated an initial user base, who praised our efforts in ensuring
a great user experience.

After investors started expressing their concerns about the
single-founder issue, I created a plan to scale up the founding
team. The plan necessitated funding, especially because attracting
any talent in Dubai is made difficult by the UAE’s visa policy. Yet
now we are actively recruiting a Director of Sales & Business
Development, which is one of the key roles that will ensure
CareZone has an extensive network of merchants signed up. CareZone
now also has a well-respected industry veteran on board as an
advisor.

A successful startup is one that is flexible and changes based
on the opportunity, and CareZone will be no different. Based on
usage patterns and feedback from our users, we will evolve and
pivot if necessary. The good news is that we already have a
scalable and robust platform on the back-end to allow us to do
that. We currently have plans to open up our API and allow online
retailers to leverage CareZone to reward their customers and give
back to the community. We'll be building client apps for more
mobile platforms as well, we’re considering white labeling the
platform for individual retailers, and we’ve identified a number of
innovative ways to integrate newer technologies into the CareZone
platform.

We’re going to continue to persevere, in hopes that investment
will follow. But no business that requires scale can go all the way
without funding, and this applies to CareZone as well. The harsh
reality is that difficult decisions will need to be made in the
very near future with respect to CareZone’s continued existence if
funding is not secured.

I am absolutely certain that we can build world-class tech
startups here in the Middle East, startups that have innovation at
the core. But we also need the investor community to step up to the
plate. We need them to encourage us to think differently, and to
push us to create new technology and business models that pave the
way for others to follow.